Saakashvili outlines new economic initiatives

Georgian President Mikheil Saakashvili announced new economic initiatives aimed at “stimulating” the private business sector on Wednesday. Speaking at a Government session in the Lopota resort centre in the Kakheti region, the President told Ministers that companies in Georgia will now receive their Value Added Tax (VAT) payments back “immediately” instead of having to go through 7-8 months of procedures.

“Returning VAT was a complicated bureaucratic process and businessmen even avoided going to the relevant institutions to get it back,” Saakashvili said. “This is a response to those who claim that the tax institutions are too active and as a result businessmen don’t have enough money to develop their businesses,” he said, adding that now the Government is giving them this money back to reinvest in their business. An additional GEL 35 million will be allocated for this purpose, as agreed with the Prime Minister, Saakashvili noted. “The amount of returned VAT might reach GEL 170-180 million this year,” the President said.

The second initiative voiced by the President on Wednesday is transferring the right to close down businesses to the Finance Ministry. “We should treat this issue with care. Decisions on closing down businesses should not be taken by lower institutions but by the Finance Minister instead. He should decide if the decision is right or not,” Saakashvili said. This change will “significantly decrease” the number of closed businesses, he added.

At Wednesday’s Cabinet session the President also offered representatives of the Businessmen’s Federation and the Chamber of Commerce the opportunity to join the Tax Disputes Council. “The recent actions of tax service are one of the reasons that the Georgian budget has not collapsed,” he said. “Adding Georgian Businessmen Federation and Chamber of Commerce representatives will make tax disputes more transparent,” Saakashvili noted.

The Georgian economy has overcome the most critical period of economic crisis, the President said at the session. “The situation has stabilised, and in some sectors we feel some revival. We are regaining the trust of investors. Almost every day I have to open new factories, which means that the old times when we used to launch new things have come back,” Saakashvili stated.

Some analysts have expressed scepticism about the effectiveness of the President’s new initiatives. Nodar Khaduri, an economic analyst and member of the Democratic Movement-United Georgia, said that businessmen getting their VAT back sooner than usual is a positive step but the current legislation already sets the deadline for giving VAT back to companies at three months. “If they have to wait 8 months this is a violation of the law,” he said. “As for the ‘immediate’ return of VAT suggested by the President, this seems a bit unrealistic, because there are some procedures that companies must still go through before the money can be returned,” he said.

It makes no big difference whether the Finance Minister or the Incomes Service will make decisions on closing down businesses, according to Khaduri. “Both the institutions belong to the executive branch. Unfortunately we do not have a strong enough court to make decisions on these kinds of issues,” he said.

Khaduri criticised the President’s proposal of including members of the Businessmen’s Association and Chamber of Commerce in the Tax Disputes Council. He suggested that by including these two authoritative NGOs in this process the authorities are trying to justify their future decisions in this field. “The two organisations might become the Government’s shields in this respect. They are NGO’s and will not have the right to legally interfere in the work of the Council, they will be merely given the right to make some suggestions,” Khaduri told The Messenger.